TreeHouse Foods updates strategic review process; exploring divestiture of some units

The TreeHouse Foods plant at 626 18th St. NE in Cedar Rapids. CREDIT ICR IOWA

TreeHouse Foods, a private-label food manufacturer that operates a meal packaging plant in northeast Cedar Rapids, provided an update today on the company’s evaluation of strategic alternatives, including the possibility of divesting some of the company’s meal preparation operations.

In a news release March 14, the company said its board of directors has concluded that the focus of its ongoing strategic review will be to continue reshaping TreeHouse by “building leadership and depth around a focused group of categories” in its higher-growth snacking and beverages business.

As part of that reshaping process, TreeHouse said it will continue its exploration of potential divestiture transactions, including the sale of portions of the meal preparation business, either in a single transaction or in a series of transactions. The board also has unanimously determined it is not the right time to pursue a sale of the whole company, but “remains open to all alternatives to maximize shareholder value.”

“Throughout the comprehensive strategic review process, we have received clear feedback from multiple constituencies that the long-term prospects for private label and for TreeHouse remain highly compelling, but the business mix is complex,” TreeHouse Foods board chair Ann M. Sardini said. “That feedback further validates the company’s strategic plan for simplification and growth. In addition, the feedback cited the impact the macro-economic and financing environment, which has changed significantly since we began the exploration of a sale of the company, has had on the company’s business in the short term. Accordingly, the board has determined that now is not the right time to pursue a sale of the entire company to maximize shareholder value. Rather, building on management’s successful transformation work executed since 2018, the board and the management team are focused on maximizing value in our higher-growth, higher-margin snacking and beverages businesses, further streamlining and simplifying the cost structure and divesting portions of our meal preparation businesses. We remain open to all alternatives to maximize shareholder value.”

“The demand trends in private label continue to strengthen, and we are well-positioned to build on our momentum in advantaged categories,” TreeHouse CEO and president Steve Oakland added, “We remain confident in our strategy and our outlook for the full year. Our commitment to supporting our customers to meet their growing demand, combined with our ongoing plans to implement supply chain enhancements to reduce costs and improve margins, will drive meaningfully improved results and value creation. I want to thank our team of dedicated TreeHouse employees for their commitment to serving our customers and delivering value as we navigate the current environment.”

The company reaffirmed its 2022 guidance, including net sales growth of at least 11% year-over-year and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $385 to $415 million, up approximately 5% year-over-year at the midpoint. The company says it expects improvement in its performance will be weighted toward the second half of the year, as labor shortages and supply chain disruption will continue to challenge profitability and volume in the first half.

“There can be no assurance that any divestitures of any portions of the meal preparation assets or any other transaction will be achieved, and TreeHouse does not intend to comment further on the process,” the company added.

The TreeHouse plant in Cedar Rapids was originally known as National Oats. It was sold to Ralston Foods in 1994, to ConAgra Foods in 2013 and to TreeHouse in 2015.